Tax hikes or tough cuts? No easy answers for state

Updated 10:01 am, Friday, September 16, 2011

Washington's policymakers will have to answer difficult questions in the coming weeks and months:

Can the state's colleges and universities survive a 30 percent cut, after absorbing nearly a half-billion-dollar budget cut earlier this year?

Will further reductions to public safety budgets make Washington unsafe by reducing or eliminating the supervision of dangerous parolees?

Is it time to get rid of all discretionary social service programs for the neediest and most vulnerable?

Is there any appetite among voters, reeling from the worst financial crisis in 80 years and continued high levels of joblessness, to raise taxes?

On Thursday, state economist Arun Raha released his latest estimate, saying the state would likely bring in $1.4 billion less in tax revenues than was figured just a few months ago. That means the state's just-approved, two-year, $32 billion budget is now almost $1.3 billion in the red.

Gov. Chris Gregoire, who has already asked state department heads to come up with proposals for 10 percent across-the-board reductions, will discuss the situation with leading lawmakers on Friday.

"We're down to the point where people have to decide what kind of state they want to live in," said Rep. Ross Hunter, D-Medina, and his chamber's budget leader.

'Old arguments are gone'

Republicans are calling for a special legislative session to address the problem, and Gregoire, in a statement, said "we can't wait until the start of (the regular legislative) session in January to take action."

But other top Democrats said the size of the budget problem, coming so soon after lawmakers earlier this year dealt with a $5 billion deficit, mostly through big cuts to education, public health and safety, would make a quick fix difficult.

"We need an approach, we need a plan. This is actually writing a supplemental budget. That simply cannot be done in two or three days,' said Sen. Ed Murray D-Seattle, leader of the Senate's budget panel.

Some Democrats, as well as groups who work with the poor, want to close tax loopholes or ask Washingtonians to agree to increase taxes next November.

"Given what the cuts will look like ... we should give the voters an option about whether they want to look at funding some of the things we'd have to eliminate," Murray said.

Even axing what's left of services like Basic Health, Washington's health plan for the poor, won't solve things, he said.

"It's $75 million if we whack the Basic Health Plan," Murray said. "There isn't $2 billion in human services (spending) ... the old arguments are gone, because of the cuts we've already taken."

Marty Brown, Gregoire's budget director, said making further cuts to the state's prison and parole system would affect public safety, and eliminating what remains of the social safety net would also be very hard.

"We need to look at what those impacts are on our citizens and the whole ... fabric of our state," Brown said.

But Rep. Ed Orcutt, R-Kalama, said Democrats were having the wrong conversation. He said it was irresponsible to talk about raising taxes on people and businesses during the aftermath of the Great Recession.

Even with the latest bad news, the state will still take in more than $2 billion this budget period than the last, two-year span, Orcutt said.

"The numbers you heard about growth in revenue when times were good, that would be great, if there weren't an increase in the number of our kids in public schools and the increase in health care costs," Murray said. "We need to put our talking points outside these rooms and do what we did last year ... and try and move forward."

'Everything on the table'

Sen. Joseph Zarelli, R-Ridgefield, who emerged as a key negotiator in tough budget talks earlier this year, said the two parties had to compromise. "I have already met with Senator Murray and stand ready to join him in working toward a response."

Looking at the $32 billion, day-to-day budget the Legislature approved in May, 49 percent was earmarked for higher education and K-12; 37 percent was supposed to go human services, as well as the state agency that looks after the welfare of vulnerable people.

Jason Mercier, an analyst with the business-oriented Washington Policy think tank, said the Legislature should change state law and increase Gregoire's authority to make targeted cuts.

"This would allow the governor to implement immediate surgical reductions while budget writers work together to come up with a supplemental budget blueprint that could be acted on in the first few weeks of the regular 2012 legislative session," he said.

But liberal interests say there's been too much cutting, adding that since 2008 there have been $9 in reductions for every dollar in additional revenue.

"The billions and billions in cuts haven't done anything to help our ailing economy, and today's news highlights the fact the state's budget problem is on the revenue side of the ledger. Washington families can't afford to subsidize unfair and unaccountable tax breaks for Wall Street banks and other special interests," said Steve Breaux of WashPIRG.

Rep. Reuven Carlyle, D-Seattle, said it was time for a "fiercely honest willingness to put everything on the table."

For Carlyle, that includes looking at the "Swiss cheese that is our tax exemption policy," as well as reforming the way government operates.

Carlyle said the state is spending $1.9 billion on technology that is "wildly uncoordinated," and needs to think about transferring responsibilities for certain tasks to the counties by granting them new taxing authority, as well as looking to consolidate state worker health insurance plans.